Byrd Boondoggle

The Cato Institute

House and Senate conferees are expected to produce a compromise Budget Reconciliation bill this week. While both versions are decidedly timid in tackling the goliath deficit, the House language includes repeal of a costly corporate boondoggle known as the Byrd Amendment, which taxes the budget as well as America’s international credibility.

Beyond its fiscal impropriety, the Byrd Amendment has come to symbolize American hubris, even underhandedness, in its approach to international trade rules. Soon after its passage, the Byrd Amendment was challenged by several countries in the World Trade Organization on the grounds that it violated certain trade rules. The WTO largely agreed, ruling that Byrd punishes foreign exporters twice — first, by imposing the duties as a remedy to dumping or subsidization (which is acceptable), and then by using those funds to directly subsidize the U.S. petitioners (which is not).

Despite the ruling, the United States failed to repeal Byrd and last year the WTO authorized retaliation by the complainants. Thus far, Europe, Canada, Japan, and Mexico have begun imposing retaliatory tariffs against various U.S. exports.

President Clinton signed Byrd into law because his only alternative was to veto the entire agriculture appropriations bill of 2001, into which Byrd was snuck at the eleventh hour. Clinton objected to the Byrd provisions and called on Congress to repeal it. Likewise, the Bush administration supports repeal.

But the Senate, in particular, has been vocal in its criticism of the WTO ruling against Byrd, finding its logic flawed and, therefore, unworthy of U.S. compliance. Such a posture is unseemly, considering that the United States coauthored the WTO rules, which have served U.S. interests well for more than 10 years.

Wouldn’t the Senate expect China and other countries to honor WTO rulings, particularly if the United States were the complainant? And if the United States sees itself as above the rules, why should other countries negotiate new agreements containing yet more rules that might be disregarded to serve some political agenda?

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